Explain how the introduction of new goods might bias the calculation of the consumer price index
Because the CPI is based on a fixed basket of goods and services, any new goods would not be included in this basket. As a result, the CPI would fail to reflect the increase in the value of a dollar that arises from new goods being introduced.
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The commons problem refers to:
a. a problem that arises when everything is privately owned. b. a situation when the resources are owned by the government and the common people have limited access to them. c. a problem that arises when government takes incorrect measures which adversely affect common people. d. a problem that arises when everyone has access to a particular resource. e. the adverse situation that arises when the government fails to take adequate measures to solve common problems.
In high schools, all teachers were paid the same based on years of service and regardless of specialization. Beginning in the 1970s, a shortage of science and math teachers developed as private industry paid more for math and science skills than schools could offer. At the same time, a decline in the number of school-age children tended to reduce the demand for all other teachers, which led to a
surplus. The economist's solution to this problem would be a. merit pay to reward the best teachers. b. recognition that all teachers do comparable work and should be paid the same. c. to raise the wages of all teachers. d. to raise the wages of teachers in fields that are in short supply and lower those of others.
Usury laws that set maximum interest rates
a. are designed to protect the consumer. b. interfere with the market allocation process. c. have an effect only if the market rate is higher than the legal maximum. d. All of the above are correct.
One result of rent control is the desire by landlords for tenants to leave, so tenants
A. have an incentive to report all infractions, no matter how minor, to the authorities. B. have an incentive to offer more rent. C. simply leave. D. have an incentive to perform many repairs for themselves.